Q. Whether I retire sooner or later than the year I turn 55, what kind of tax implications will I have in taking a partial lump sum or the whole balance lump sum for something like a vacation home? A. If you retire from Thrift Savings Plan-covered employment during or after the calendar year in which you reach age 55, you will be exempt from the Internal Revenue Service 10 percent early withdrawal penalty for any withdrawals you take.
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Q. I will be 52 years old March 9. I am covered under FERS, and I have 31 years of federal service. If my base offers an early-out this year, I plan to take it. I have a substantial balance in the Thrift Savings Plan and would like to withdraw it in its entirety when I take the early-out so I can invest it in my daughter’s business. 1. Will I be penalized for withdrawing my TSP funds early? If so, how much? I know I will be taxed, and I am OK with that. My husband plans to keep…
Q. Is it possible to pay all taxes on the Thrift Savings Plan at retirement and then still keep money in a Roth TSP? If not, is there any way to convert money in TSP before I turn 70 to avoid having to take minimum distribution? I do not want to pay taxes again on money that I may not need if it is paid out as a minimum distribution. A. You may not convert a traditional TSP balance to a Roth TSP balance. You should also reconsider the logic of what you’re trying to do, which is electing to…
Q. I am soon to be 65 and plan to retire within the year and have debt in the amount of $67,000. This is not including my home, car, etc. I have been considering withdrawing a large amount from my Thrift Savings Plan to pay this debt. With my pension and Social Security benefits, if I figured correctly, I would be bringing home about what I do now after taxes. I know it’s personal preference, but is it a wise decision? A. I can’t say if it’s the best course of action, but the debt needs to be paid. The…
Q. I was enlisted in the Marine Corps from 2004 to 2008 and have been a full-time employee at the Social Security Administration since March 2012. So, I have a uniformed services Thrift Savings Plan account and a civilian TSP account (using pretax and Roth contributions). Nothing has been contributed to the uniformed services account since I left the Marines in 2008, so I asked someone in human resources here if I could combine the accounts. I was initially told this wasn’t possible, but after my own research, I found Form TSP-65 – Request To Combine Civilian and Uniformed Services…
Q. I have a Roth IRA and Roth TSP, and I am not eligible for catch-up contributions at this time due to my age. What is the maximum I can contribute to both for FY13? A. There is not a combined maximum, and the limits apply to calendar years, not fiscal years. The most that you can contribute to the Roth TSP for 2014 without catch-up is $17,500. The limit for Roth IRA contributions for 2014 is $5,500, but this might be reduced for you based on your tax filing status and income for the year. You should consult IRS…
Q. I received a 1099R from the Internal Revenue Service. They do not differentiate the annuity income from the supplement income. I’ve read the IRS Publication 721 tax guide to U.S. Civil Service Retirement benefits. There is no mention of the special retirement supplement. I called the IRS; they said they never heard of the supplement being treated like Social Security. They also advised me to report the income on the 1099R as is (do not separate the supplement from the regular annuity). If it is indeed to be reported like Social Security, how do I go about it without…
Q. I did a partial withdrawal from my Thrift Savings Plan last year at age 60. How do I report the income on my tax return? Is it strictly income? Are there no capital gains to report? If there are gains, how do I determine what the gains were? A. You will receive a 1099 reporting the distribution, which will be taxed entirely as ordinary income.
Q. I retired early from the post office last year. At the time, I had a two loans out on my Thrift Savings Plan account. Now the time has come to pay the piper and the tax bill is enormous. I just turned 56 in January. Is there any way to lessen the blow or offset any of the taxes and penalties from the unpaid loans I took out before retirement? Or at least something I can do, other than pay the full amount of early withdrawal and regular taxes? A. Assuming that it’s been more than 60 days since…
Q. During the retirement process, how do you move the Postal Service Thrift Savings Plan account to a private, individual IRA so that there are no taxes? A. After you’ve retired, you use Form TSP-70 to request a direct rollover to an IRA.